Westpac has claimed a qualified victory over the corporate regulator ASIC in its interest rate rigging case. Justice Jonathan Beach found the bank had acted unconscionably on four of 16 occasions but ASIC failed to show the trades amounted to market manipulation.

“In summary, I have rejected ASIC’s case under section 1041A and 1041B of the Corporations Act. Although I accept that Westpac through its traders did on four occasions during the relevant period (April 6, May 20, December 1 and 6, 2010) trade in prime bank bills in the bank bill market with the dominant purpose of influencing the level at which BBSW was set in a way that was favourable to its BBSW rate set exposure, I do not consider that the contraventions of Section 1040A and 1040B have been made out” Justice Beach said on Thursday morning.

“For the moment, it is sufficient to say I am not satisfied that the holding of the relevant dominant purpose on the said four occasions, together with other evidence, establishes the effect or likely effect of creating or maintaining an artificial price … And as for 1040B, I likewise do not consider that established such a purpose for trading in prime bank bills establishes a false or misleading appearance with respect to the market (s) in or price for trading of such derivative instruments”.

Lawyers for ASIC however also claimed victory, describing themselves as “ecstatic” about the result. They say Justice Beach’s findings that Westpac engaged in unconscionable conduct amounted to a significant win for the corporate regulator in what was a difficult case for them.

“On the four occasions that I have identified, Westpac engaged in unconscionable conduct under section 12CC of the ASIC Act … but in making this finding I have avoided descending into the ‘formless void of individual moral opinion’. It is sufficient for me to say … without dwelling in the paradigm or moral obloquy, Westpac’s conduct was against commercial conscience as informed by the normative standards and thier implicit values enshrined in the text, context and purpose of the ASIC Act specifically and the Corporations Act generally.”

Westpac’s chief executive Brian Hartzer and chairman Lindsay Maxsted personally reviewed line by line and decided to back their traders.

Westpac was alleged to have engaged in unconscionable conduct and market manipulation on 16 occasions when it was involved in setting the benchmark rate between April 2010 and June 2012.

Westpac argued that and the remaining four alleged contraventions have been taken out of context. The bank is also expected to say that ASIC has misunderstood at least some of the complexities involved.

ASIC argued that Westpac developed and implemented a practise of trading bank bills during the rate set window to benefit the bank’s long or short exposure.

It also argued that during the relevant period Westpac’ traders were acting with the sole or dominant purpose of moving the rate so that it BBSW rate would produce a yield that did not reflect the genuine forces of supply and demand.

Earlier , the Commonwealth Bank admitted it attempted to engage in unconscionable conduct and paid $25 million in penalties and costs as part of the settlement of a case alleging it manipulated the bank bill swap rate in 2012.

National Australia Bank and ANZ Banking Group also settled a similar case brought by ASIC with admissions they attempted to engage in unconscionable conduct.

CBA’s penalty was half of the $50 million paid by each of NAB and ANZ – but ASIC brought fewer allegations against CBA.

Approving said the general public would be “shocked, dismayed and disgusted” by the behaviour of the banks and their traders.

The Westpac trial late last year revealed much colour about the interactions of its traders, , and as well as the used in the trading room.

This article was originally published by the Australian Financial Review. Read the original , or follow the AFR on .

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